Hill Reportedly Got FBI Sting Payment

Assemblyman Frank Hill (R-Whittier) received a sizable honorarium this year from one of the phony companies set up by the FBI as part of its sting operation aimed at uncovering corruption in the Capitol, sources familiar with the probe told The Times.

It was the first specific indication of why Hill is a subject of the FBI investigation.

The payment--in the “ballpark” of $2,500, according to the sources--was one of a series of campaign contributions, honorariums and fees paid out to legislators and staff members by FBI agents posing as businessmen during the three-year investigation.

The sting phase of the FBI operation ended on Aug. 24 when agents, armed with six search warrants, raided the offices of four lawmakers and two aides to look for evidence of violations of a federal anti-extortion statute.

In the middle of the raid, according to sources familiar with the investigation, investigators found evidence of a federal crime unrelated to their sting operation in the files of one of the offices and hurriedly secured a seventh warrant to seize additional documents.

Hill did not respond to numerous attempts to reach him for comment Thursday.

Under state law, Hill must report his outside income, including honorariums, but payments received this year need not be disclosed until next March. Honorariums--usually payments for speeches or appearances at conferences--are generally legal, as long as they are not taken in exchange for an official act and are reported.

Hill is one of two lawmakers now identified as receiving honorariums this year from Peachstate Capital West Ltd., one of five bogus companies set up by the FBI as part of its sting.

Sen. Joseph B. Montoya (D-Whittier) was paid $3,000 by Peachstate and met with FBI agents who were posing as “company” officials on June 30, according to a source familiar with the investigation.

Montoya has insisted that he has acted properly.

The senator cast a crucial committee vote for the second of two special interest bills by Assemblywoman Gwen Moore (D-Los Angeles), which would have benefitted the sting-created companies. The measures--one in 1986 and the other this year--would have allowed banks to purchase low-interest bonds from Peachstate or its predecessor, Gulf Shrimp Fisheries of Mobile, Ala. The “companies” supposedly intended to build a shrimp processing plant in the Sacramento area.

Sen. Alan Robbins (D-Van Nuys), who with Montoya is a member of the Senate Banking and Commerce Committee, confirmed Thursday that he was also offered an honorarium from John Shahabian, a Senate aide who became an informant for the FBI. Robbins said he rejected the honorarium.

Sources said that Robbins was approached by Shahabian some time before a crucial June 22 vote by the Senate Committee on Banking and Commerce on the Peachstate bill.

The lawmaker missed both the committee vote and the vote on the Senate floor because he was away from the Capitol.

Others Contacted

Several other members of the banking committee who were contacted said they were not offered any payments.

Regarding the seventh warrant, federal officials would not describe the nature of the evidence they seized or identify the office in which it was discovered.

The initial warrants allowed investigators to search the offices of Hill, Moore, Montoya and Assembly Republican Leader Pat Nolan of Glendale, as well as Karin Watson, an aide to Nolan, and Tyrone Netters, an aide to Moore.

Some time after midnight, on Aug. 25, the federal investigators left the Capitol in the middle of their search and drove to the home of U.S. Magistrate John F. Moulds with a signed affidavit and other documents needed to obtain the additional court order.

Moulds, who declined to comment, had been alerted that he might be needed that night to consider requests for additional search warrants. The initial warrants allowed the FBI to remove files, memos, calendars, letters and financial records connected with the bills that would have benefited bogus companies that had been set up by the FBI as part of the sting.

Refused to Comment

Although his office was not search, Board of Equalization member Paul Carpenter, a former state senator, is also a subject of the FBI probe.

Carpenter has refused to comment on the investigation. “I don’t want to do or say anything to jeopardize the FBI’s investigation,” Carpenter said earlier this week in his first statement on the probe. Just how quickly U.S. Atty. David Levi will move to bring the cases to conclusion is still uncertain.

However, the federal grand jury here has begun issuing a series of subpoenas to gather additional evidence, including bank records and other documents, according to several sources. An FBI agent in Mobile, who helped set up Gulf Shrimp Fisheries, predicted that the sting would lead to prosecutions.

“With this length of time (three years), I would expect some indictments coming out,” said Wilbur Ramsey, assistant special agent in charge of the Mobile FBI office. Ramsey said that his office supplied one of the agents who posed as an official of Gulf Shrimp. That agent is now back on the job in Mobile, Ramsey said.

The agents posing as businessmen shopped around for a legislator to carry their bill, several lawmakers have told The Times.

A number of Sacramento-area legislators were approached in 1986 by Darryl Freeman, a lobbyist and former legislative staff member, and by “Jack Gordon,” now known to be an FBI agent, and were asked to carry the first of the special-interest bills.

The lawmakers all turned down the requests, aides said, because they felt the bills were too narrowly focused. The legislators were Assemblymen Lloyd G. Connelly and Phillip Isenberg, both Democrats, and Sen. John Doolittle, a Republican. Also declining the agents’ overtures was Assemblyman Sam Farr (D-Carmel).

Contributing to this story were Times staff writers Mark Gladstone, Richard C. Paddock and Douglas Shuit.